3 October, 2015
Due to the current economic uncertainty, reportedly the Otoritas Jasa Keuangan (OJK) will issue a circular letter to ease sanctions on insurance companies that fail to meet the minimum capital adequacy ratio requirement (risk-based capital or RBC), and will permit a decrease in the minimum solvability level from 100% of RBC to 50%. The OJK considers the relaxation as necessary as these failures are mainly caused by capital market volatility that negatively impacts the insurance companies' investment assets value, which is in turn detrimental to their RBC, not by the unsound financial fundamentals of the insurance companies themselves. This leniency, however, will only be temporary and is anticipated to be in effect from September 2015 to December 2015. As of the date of this newsletter, the formal OJK circular letter has not been issued.
For further information, please contact:
Mark Innis, Baker & McKenzie
mark.innis@bakermckenzie.com
